Utility theory is a framework used in economics and decision-making that explains how individuals prioritize their preferences when making choices based on the satisfaction or pleasure derived from various outcomes. It focuses on the idea that people aim to maximize their utility, which can vary significantly depending on personal values, context, and framing effects. This concept is pivotal in understanding behaviors related to risk and loss, as well as how individuals allocate resources in the pursuit of maximizing their overall happiness or satisfaction.
congrats on reading the definition of Utility Theory. now let's actually learn it.